While everyone is focused on the upcoming battle over Iraq policy, there is another battle shaping up in Washington. It has the potential for contributing to a revival of Republican fortunes, but only if Republicans do not mishandle it.

That battle will be over federal spending. Over the past six and a half years, the Bush administration has quite deliberately allowed the issue of spending and limited government to atrophy. This strategic choice has been an important contributing factor in the stresses pulling the Republican coalition asunder.

Now spend-happy congressional Democrats are offering the Republicans an opportunity to reclaim their position as a party that can be counted on by mature people to stand athwart fiscal imprudence and onrushing socialism. After twelve years in the minority (minus a brief interlude in the Senate after James Jeffords’ defection), Democrats are anxious to put their stamp on federal spending. Of course, this means, in many cases, blowing up program budgets.

The expansion of the SCHIP program providing health insurance to children is a prime example. Bills now in conference committee would massively increase the number of families covered, including those with incomes up to 400% of the poverty level. The Democratic approach would also transfer billions of dollars from payments to Medicare HMOs to fund the SCHIP expansion. While this policy change allows Democrats to argue that they are fiscally responsible, it is no coincidence that it would also undo the movement toward a more free-market system adopted by Republican congresses since 1994. Taken together, the SCHIP expansion can reasonably be seen as an important incremental step toward socialized medicine. President Bush has threatened a veto, and should carry through on it if a completed bill reaches his desk. He should also not hesitate to veto other examples of largesse.

However, Bush and congressional Republicans must be careful not to fall into a couple of possible traps.

First, they must have a plausible answer for why Democratic largesse is now "bad" after several years when Republican largesse was "good." There may be several possible arguments. They might argue that Democratic largesse is simply bigger than Republican largesse, and the problem is one of scale. (It is not yet clear whether such an argument will be factually correct.) They might contend that, as with SCHIP, the problem of spending is compounded with the problem that Democratic spending is more coercive; in other words, the terms of the largesse are as important as the fact of it. Or Republicans could simply confess that they were wrong during the years of their spending spree, ask forgiveness, and contend that they have now learned their lesson; they have, as it were, come home and have rediscovered the virtues of their traditional position. However it is done, Republicans must offer a compelling narrative to go along with their return to tight-fistedness. Otherwise, it will appear merely opportunistic and may indeed boomerang against them.

This burden should not be underestimated. There is no question that the high ground on spending and limited government was surrendered by the GOP in the drive for "compassionate conservatism" (and perpetual reelection), and cannot simply be reoccupied without a struggle. This is not to say that Democrats have supplanted Republicans on the hilltop, only that both parties are slinking around in the muck, locked (in the views of most voters) in an embrace of cynicism and profligacy. Republicans cannot simply return to 1997 as if the intervening decade had not happened (or as if voters had not noticed).

The second trap Republicans must avoid—for both short-term and long-term reasons—is to succumb to the temptation to score easy demagogic points when Democrats do propose to find offsetting savings. For example, Republicans are reportedly preparing to attack Democrats for "cutting Medicare" to fund SCHIP. While some Republicans may think this holds short-term promise, it is a bad argument, and one that undercuts the broader point they should hope to be making. The SCHIP proposal should be attacked because of the money it spends and the choices it eliminates, not because of the fact that Democrats actually claim to be cutting spending to finance it. And as delicious as it might seem to hoist Democrats on their own demagogic Medicare petard, the fact is that somebody is going to have to cut Medicare very soon if the nation is going to avoid the collapse of the program or a gigantic payroll tax increase. Do Republicans really want to make it harder to control future entitlement spending? Not least, such attacks—made in the same breath as complaints that Democrats are spending too much—cannot help but seem hopelessly incoherent and even more opportunistic.

Altogether, Republicans can make some hay in the budget wars to come, even repairing some of their losses among fiscally conservative independents who fell away in 2006. If they succeed, several candidates for the Republican presidential nomination are poised to pick up the cudgel in 2008. The candidates’ professions of fidelity to traditional Republican limited government will be rendered more credible if Bush and congressional Republicans lay the groundwork now. However, they must pick their fights carefully and make a coherent, plausible, and principled argument. And this is not as easy as it sounds.

Andrew E. Busch is a Professor of Government at Claremont McKenna College and an Adjunct Fellow of the Ashbrook Center.